Quantitative Support and Demand Function Pivot: A Study on Industry Upgrading Based on the Prebisch-Singer Hypothesis

This paper explores how latecomer regions can achieve effective industrial upgrading through "Quantitative Support" policies within the "center-periphery" global trade structure. Based on the Prebisch-Singer Hypothesis, the world trading system is bifurcated into a "center" that exports manufactured goods with high income elasticity and a "periphery" that exports primary products with low income elasticity. Peripheral economies face a structural trap of "immiserizing growth" because the income elasticity of demand ($e_y$) for their exports remains chronically below 1 or even negative. This paper proposes that government intervention should not aim to establish permanent trade barriers, but rather implement precisely calculated "Quantitative Support." The core of this strategy lies in measuring a critical support level ($S^*$) that is just sufficient to pivot the industrial demand function. Once the support intensity enables the industry to cross the threshold of economies of scale—thereby shifting its income elasticity of demand onto a benign trajectory where $e_y > 1$—the support policy should immediately trigger a "sunset clause" and exit. This study provides a quantitative policy boundary and theoretical basis to avoid the "perpetuation of infant industries" and the subsequent trade protectionist pitfalls such as rent-seeking and X-inefficiency.